Item 2. Ordeals Continue

Flooding in Thailand

In October 2011, when TMC's production had recovered from the Great East Japan Earthquake and was beginning to make up for lost production on a global level, Japan's automotive industry was dealt another major blow from a natural disaster. Major flooding plagued Thailand for approximately four months beginning in July, severely damaging the parts industry in that country and severing the supply chain.

Fortunately, both the three plants, including the Samrong Plant, and the office of Toyota Motor Thailand Co., Ltd. (TMT), TMC's local production and sales company, escaped damage. However, industrial parks in many areas were flooded, forcing numerous parts companies to halt production. The flood's effects became quite noticeable beginning in October, forcing TMT to stop operation early in the month. By the end of the month, the effects began to spread to other Southeast Asian countries, such as Indonesia and the Philippines, as well as to Japan, North America, and South Africa, where Toyota production sites curtailed production levels or adjusted production hours due to the parts shortage.

As though recreating the scenes following the Great East Japan Earthquake, desperate recovery efforts were carried out in cooperation with suppliers and other companies in the same industry. As a result, TMT resumed production albeit at an adjusted level by late November, enabling Toyota plants in Japan and North America to return to normal levels. By early 2012, TMT was able to return to its normal production levels. Nevertheless, the overall impact of the Thailand floods on TMC was huge, occurring at a time when TMC had just begun to make up for lost production following a great earthquake disaster, and causing it to lose out on 260,000 vehicles in global production.

TMC decided to donate 20 million bhat to help alleviate the flood damage. In November, TMC President Toyoda visited the Bureau of the Royal Household Thai and presented the funds to the Royal Foundation. During the trip, President Toyoda also visited the Samrong Plant to check on its recovery status and offer encouragement to its employees.

Despite the natural disaster, TMC did not change its view of Thailand as an important business location and announced in January 2012 plans to expand TMT's capacity. TMT will build Gateway Plant No. 2 with an annual capacity of 70,000 vehicles, with operation beginning by mid-2013. The announcement also included plans to invest new funds in Thai Auto Works (TAW), which is funded in part by TMT and had been kept idle since June 2010, for it to resume production at 20,000 vehicles a year starting at the end of 2012. This series of investments is expected to increase TMC's production capacity in Thailand to 760,000 vehicles a year by mid-2013.